IT was interesting to read the comments from some analysts yesterday following the news that the Chinese e-commerce group JD.com was pondering a bid for electrical and tech retailer Currys – after it rejected a £700 million unsolicited takeover approach from US private equity group Elliott, the owner of bookseller Waterstones.

As the UK high street and retail park stalwart saw its share price surge on news of the takeover noise, Dan Coatsworth, investment analyst at AJ Bell, noted that 55% of the FTSE 350 had not recovered from the Covid-induced stock market crash in February 2020, even though the bulk of major market indices globally are now trading above that level.

Currys sits within that FTSE 350 group and shares have slumped 65% since the eve of the market crash four years ago, Mr Coatsworth pointed out – taking February 21, 2020 as the record date as that was the last trading day before the global market correction kicked in.

At AJ Bell, investment director Russ Mould suggested that a suitor would have to offer at least 71.1p per share to match the 51% average premium seen on UK-listed takeovers in 2023.

“Currys is the last big UK electricals chain with a physical store estate which makes it a unique asset on the domestic stock market,” Mr Mould noted. “In theory, that status deserves a premium takeout price. However, in this case, its unique status is down to it being the last man standing in an industry which has migrated online.

“The company has kept going over the past few decades thanks to a bigger push on customer service by helping people who need advice on technology or equipment fixed. For some, that personal touch is preferable to buying something online.”

Noting that the retailer’s UK business has downsized and sharpened its focus on retail parks where stores have the space needed to showcase products and advise customers, he added: “It’s not been an easy journey for Currys as its mobile phone arm has suffered from shifting consumer habits whereby people are upgrading handsets less frequently.

“Across the board, Amazon and other online retailers have pushed hard on price and Currys has had no choice but to match them. Over the past year, consumers having been shying away from big-ticket items which has created a tougher environment in which to shift TVs and laptops.

“These headwinds have weighed on the company’s valuation and left the share price in the gutter.”
Another interesting insight on Currys is that Mike Ashley’s last year built a stake in the business and as Mr Mould pointed out: “Frasers is always one to spot a bargain.”

However, he added: “It is unlikely that Frasers would make a bid for the group. While it has expressed a desire to be a bigger player in electricals, it prefers to buy companies when they are on their knees, not after someone else has also pushed up the price with an offer. Frasers had its chance to bid for Currys last year when no-one else was interested.”